When you negotiate with a monopoly, it usually becomes a take-it-or-leave-it deal. If a pharmaceutical company wants to increase its profit, it can sell to the monopoly at a price that is higher than its marginal cost, but below its total cost. This leaves the fixed costs to be absorbed by a smaller market’s share (the U.S.), increasing the unit domestic cost of the drug. It also reduces the total dollars available for research and development, a major portion of fixed costs. By reimporting, you also reduce research and development recovery on U.S. sales.

My wife had breast cancer and took Herceptin, a treatment that statistically increased her chance of survival in the 30 to 50 percent range. She is alive beyond the 10-year point. Had such a law been in place during the period Herceptin was developed, it might not have reached market and my wife might not be alive today.